ORDER
1. This is an appeal filed on May 11, 1988, by Shri Chandrasekhar Hari Joshi (hereinafter referred to as “the appellant”) against Bombay Papers Ltd. (hereinafter referred to as “the respondent company”) in respect of 10 equity shares (distinctive Nos. 226 to 235 under Certificate No. 25) on the ground that the respondent-company has failed to register transfer of the shares in his name or intimate to the appellant the decision as to the registration of transfer of the said shares. The appellant purchased on January 7, 1988, 10 equity shares of Rs. 100 each from Dr. (Smt.) Banoo Coyaji and Dr. Kurus J. Coyaji (hereinafter referred to as “the transferors”) and lodged them with the company on January 7, 1988. On or about March 9, 1988, the appellant, by his letter to the respondent-company, once again requested the company to register the transfer of shares and make necessary endorsement in the said share certificate in his favour. According to the appellant, the respondent-company has failed to comply with the provisions of the Companies Act and had neither conveyed refusal to register the transfer of shares nor sent any communication as regards the transfer lodged in spite of the statutory duty on the respondent-company to take a decision regarding registration of transfer of shares within two months from the date on which the instrument of transfer was lodged with the respondent-company, i.e., January 7, 1988. According to the appellant, he has complied with all the provisions of law as regards the transfer of shares and there is no impediment under the articles of association or under any other law to register the transfer in his favour. The appellant has prayed that as the respondent company has failed and neglected either to send notice of refusal or to send any communication in respect of transfer of shares, the respondent-company may be directed to register the transfer of shares in favour of the appellant. The appellant has also submitted an application on May 11, 1988, requesting condonation of delay of two days in filing the petition as he was awaiting a reply from the company to his reminder dated March 8, 1988. A notice was issued to the company on August 11, 1989, to file their reply in the matter and two reminders were issued on June 16, 1990, and July 10, 1990. However, the company did not file any counter-representation as per the notices. A notice of hearing on October 29, 1990, was issued to the company on October 9, 1990, and Shri D.K. Ailawadi, advocate, appeared on behalf of the respondent-company. Shri Ailawadi requested for an adjournment for giving time to the respondent-company to file their affidavit in reply to the petition. This was objected to by the appellant. However, the company was given an opportunity to file their reply on or before December 24, 1990, and the appellant was directed to file his counter-reply on or before January 4, 1991. The case came up for final hearing on February 7, 1991.
2. In the reply filed by Miss Claude-Lila Parulekar, Chairman of the respondent-company, it has been stated that Bombay Papers Ltd. and Sakal Papers Ltd. were founded by her father, late Dr. N.B. Parulekar and that her mother was actively associated with both the companies. After the death of her father, the company went into the control of Mr. Jasvantlal Maturbhai and Dr. Mrs. Banoo Coyaji, one of the transferors of the impugned shares, in their capacity as executors of the estate of late Dr. N. B. Parulekar. It is further stated that the appellant was a junior officer in Sakal Papers Ltd. and was actively involved with the execution of the estate of late Dr. N.B. Parulekar in handing over the control of Sakal Papers Ltd. to the Pawar group. It is also stated that, at about the time of the lodging of the impugned shares, both the transferors who were directors of the company resigned from the board of directors of Bombay Papers Ltd. and there was nobody except the chairman to look after the work of the company. On behalf of the respondent-company, it has been further stated that the share transfer form was not in accordance with the provisions of law as it was not duly stamped and executed as per the provisions of the Stamp Act and these facts were intimated to the appellant orally. According to the respondent company, the appellant had offered to collect back the documents but he did not collect the same but wrote a letter on March 8, 1988, in spite of being told that the transfer of shares cannot be registered as it was not in accordance with law. In the counter-reply filed by the appellant on January 21, 1991, he has denied that he was orally informed about the refusal to register the transfer of shares or that he had volunteered to take back the shares. He has also denied that he was in collusion with the executors of the estate of late Dr. N.B. Parulekar or was involved in helping the rival group in taking over Sakal Papers Ltd.
3. During the hearing, both the appellant and the respondent-company reiterated the points mentioned in their replies. In response to a specific query from the Board, the respondent-company admitted that the share certificates were still with the company and refusal to register the shares was not conveyed in writing to the appellant. It was also admitted that no board resolution was passed refusing to register the transfer of shares as the matter was not placed before the Board on the ground that the transfer document was an invalid document. It was also admitted by the respondent-company that the articles of association do not provide for any powers to the board of directors to refuse to register the transfer of shares.
4. It is clear from the facts that have emerged in the hearing that the impugned shares were lodged with the company on January 7, 1988, and are still with the company. As per the provisions of Section 111 of the Companies Act, the company is required to intimate the decision of refusal to register the transfer of shares to the transferee within a period of two months from the date of lodgment of the shares. In case the company fails to intimate its decision about the transfer, the transferee can file an appeal under Sub-section (3) of Section 111 within four months from the date of lodgment of the shares. The articles of association of the respondent-company do not contain any powers to refuse to register transfer of shares. The matter regarding transfer of the impugned shares has never been placed before the board of directors. It is quite clear on the basis of the reply filed by the respondent-company that, in the opinion of the company, the transferee is an undesirable person and, therefore, should not be made a member of the company. The main contention of the respondent-company is that the share transfer deeds have not been presented in accordance with law inasmuch as they are not duly stamped and duly cancelled under the provisions of the Indian Stamp Act and as the provisions of Section 108 are mandatory, the transfer application was not entertained and it was not necessary to place it before the board of directors. Under Section 108(1) of the Companies Act, a company cannot register the transfer of shares unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and the transferee has been delivered to the company along with the share certificates in question. In this case, it is admitted by the company that the transfer document along with the share certificate has been delivered to the company. The appellant has fifed a copy of the letter sent to the company on January 7, 1988, lodging the documents along with a xerox copy of the share transfer form and share certificate. The consideration shown in the transfer form is Rs. 500 and stamp of Rs. 2.50 is affixed on the transfer form. About cancellation of stamps, the relevant provisions are given in Section 12 of the Indian Stamp Act.
5. Under Sub-section (1) of Section 12 of the Stamp Act, whoever affixes an adhesive stamp to an instrument which has been executed by any person shall, when affixing such stamp, cancel the same so that it cannot be used again. Sub-section (2) thereof makes it clear that any instrument bearing an adhesive stamp which has not been cancelled so that it cannot be used again, shall, so far as such stamp is concerned, be deemed to be unstamped. Sub-section (3) thereof provides the manner in which the adhesive stamp can be cancelled. In Tara Prosad Chakravarty v. Orissa Textile Mills (Appeal No. 6 of 1970 decided on December 28, 1972), the Company Law Board held that unless the adhesive stamp affixed to the transfer deed is cancelled by the executant of the deed in accordance with the provisions of Section 12 of the Stamp Act, legally the share transfer deed is not duly stamped and, under Section 108(1) of the Companies Act, it is mandatory that a company shall not register transfer of shares unless a properly executed instrument of transfer “duly stamped” has been delivered to the company. It is clear from the documents lodged with the company, which were produced by the company before us, that the adhesive stamps are not cancelled and, therefore, the company was right in not allowing registration of shares in the name of the appellant as it was not a valid document in terms of the provisions of Section 108 of the Companies Act. However, we have taken note of the fact that the company has neither informed the appellant in writing about the refusal of registration or lacuna in the document lodged with them since January 7, 1988, and, therefore, the appellant could not take subsequent action for rectifying and relodging the instrument after complying with the various provisions of the Companies Act. This has naturally put the appellant in considerable difficulties in asserting his rights as the transferee of the impugned shares. In proceedings under Section 155 of the Companies Act, the High Court has inherent powers to give directions to the company to return the transfer deed to the person who has presented the same and give liberty to the applicant to submit the share documents afresh upon taking necessary steps under the law. There are no such inherent powers available to the Company Law Board under the present Section 111 of the Companies Act as the amended section as per the 1988 amendment has not yet come into operation. As the respondent-company had withheld the share certificates for a period of more than two years without any justification, the appellant will have considerable hardship in relodging the transfer deeds even if the company now returns the documents as the appellant can lodge the documents with the company afresh only if the period prescribed under Sub-section (1A) of Section 108 is extended by the Central Government. Considering the fact that the respondent-company is a public limited company and the various provisions of law to ensure speedy decision on share transfer documents within a statutory period, we have no hesitation to conclude that the company’s action in not returning the share certificates to the appellant is arbitrary and without any justification. In view of this, it is desirable that the company returns the share certificates forthwith to the appellant so that he could be free to get the instrument duly stamped, adjudicated by the appropriate authorities and also make an application under Section 108(1A) to the appropriate authorities.
6. In view of the facts and circumstances in this appeal, however, we hold that the instrument of transfer was not duly stamped as the share transfer adhesive stamps have not been cancelled in accordance with the provisions of Section 12 of the Indian Stamp Act and is not in sufficient compliance with the provisions of Section 108(1) of the Companies Act and, therefore, the appeal is dismissed.